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Unformatted text preview: 68 B.C. The first Jewish Shekel is created in revolt to Roman rule. 50s B.C. Julius Caesar mints gold Aureus, at a weight of 40 coins to a pound of gold 31 B.C. Augustus begins rule until 14 A.D. Aureus spreads as far as India. Augustus creates the Denarius, a silver coin worth about a day’s pay. He takes authority to mint the coin away from the Roman Senate. Denarius of Tibirius Caesar (14 – 37) 36 Econ 350 U.S. Financial Systems, Markets and Institutions Class 4 source: Federal Reserve Bank of Richmond 20s A.D. As the Roman Empire expanded from present-day Belgium to India, it had a difficult time in supplying enough coins. This led to deflationary pressures, and the re-emergence of commodity money such as blocks of salt as pay for Roman soldiers. 64 A.D. Rome burns. In the preceding years, Caligula and Nero had spent excessively because of the high value of coins due to deflation. As the rulers became more greedy, Nero began to reduce the silver content of coins. Over time, rulers begin to reduce the silver content of the Denarius, from 100% to eventually 5%. This leads to catastrophic inflation. 200 A.D. By this time, there has been so much inflation due to silver dilution of coinage that all faith in the Roman monetary system is lost. The former Roman empire returns to a barter system and the weighing of gold and silver. The Dark Ages ensue. 618 A.D. Chinese are the first to use paper money 1000 A.D. Without money and effective commerce, Europe is stuck in a feudalist system known as the Dark Ages. People must work the land to pay tribute to the lord (or landowner). Without money as a dominant means of exchange, it was difficult 37 Econ 350 U.S. Financial Systems, Markets and Institutions Class 4 for a merchant class to develop, or for people to have the time to develop arts and sciences. 1200s A.D. Rumblings of modern money. European countries begin to mint coins. 1400s A.D. First developments of paper currency or fiat money in the West. In Italian provinces, such as Venice, bankers begin to issue bank notes redeemable for a certain amount of specie (gold or silver). As these circulate, they function as paper money. The bankers (such as the Medicis) also made loans and charged interest. With the development of a banking system, the Renaissance was able to flourish. In Amsterdam, goldsmiths become important as a means of weighing, assaying, and storing gold nuggets used for transactions. Deposits slips of the goldsmiths become a form of paper currency. Fractional reserve banking begins as the goldsmiths make loans with some of the gold held in deposit. 1558 A.D. Elizabeth I becomes Queen of England. The Henry’s before her had debased the coins by reducing silver content, and the populace “clipped” the coins by filing them down. In an attempt to improve the coinage, the Queen mints new coins. They disappear from circulation as people spend the old coins and hoard the new coins, as predicted by the queen’s financial advisor, Thomas Gresham. coins, as predicted by the queen’s financial advisor, Thomas Gresham....
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